A public diary on themes around my books

July 03, 2005

Does the Long Tail apply outside of media and entertainment?

My
original article and most of the examples I've focused on here are in
the media and entertainment industries, mostly because that's where the
most accessible examples are. Music, video, and books are fun,
universally understood, and have the best statistical evidence of the
Long Tail at work. There's just a ton of data there. Ten years of
Amazon, five years of Netflix and Rhapsody and at least that long for
all their kin have shown just how dramatic the effect of infinite shelf
space can be in revealing the true shape of consumer demand.

Q: So why don't you write more about all that here?A:
I'm saving it for the book, which will be at least a third about the
Long Tail in physical goods, services, advertising and so on.

Q: Why?A: It's a very reasonable deal I worked out with my publisher, Hyperion, which has been very open-minded about this experiment in book writing in public.
Knowing that there will be a big chunk of fresh, and I hope equally
interesting, research and analysis of the Long Tail in industries and
markets where one might not thought it would be a force should be a
good reason to buy the book, even for those who are already fluent
entertainment longtailers.

Q: Fair enough. But are there any broad differences between
the media and entertainment industries and the others, such as physical
goods, that are worth keeping in mind?A: Yes. As the graphic above (click on it for a readable version), which is taken from the original article,
implies, there are two steps to the Long Tail. The first is digital
catalogs of physical goods, such as those of Amazon or eBay. These have
unlimited capacity and can offer search, recommendations, infinite
information about products and flexible categorization. That improves
the economics of retail dramatically compared to traditional stores,
which allows them to carry far more products. This gets you half-way
down the Tail

But to get all the way down the Tail you need digital catalogs of digital goods.
Think everything from iTunes to Google. This is where the economics are
best of all: near-zero marginal costs of manufacturing and
distribution. What that means is that you can basically stop
discriminating entirely, and give up trying to guess what people want.
Offer everything and let the marketplace decide what it wants. Chances
are you'll be surprised by what people gravitate to, not just in the
unexpected demand for niches but in the immense range of tastes. That's
the Long Tail.

» The Long Tail of Software? from The Hitchhiker's Guide to 650
We’ve heard so much (and too much) regarding the long-tail of content. . . books, blogs, podcasts, videos. .. but is there such as thing as a software long-tail? I would say so, but the harder question to answer is that “is there money to be made... [Read More]

Tracked on July 31, 2005 at 12:28 PM

Comments

Chris, the marginal cost of producing digital goods may be near zero, but the transaction costs associated with buying them are not zero.

In particular, the cost of information -- the cost for someone to gather enough data to choose between a vast selection of items -- is high.

Even with digital goods, we need to give people the information and tools they need to find and discover the items they want. We will never be able to stop discriminating entirely.

I think that transaction costs and search costs/cost of information are two important reasons why subscription services for media (i.e. music and film) will become more popular. It is often ineffective and costly (alternative cost) for a customer to think about if she should spend 99 cents on song A or song B or both. Subscriptions can lower the cost. But such a system still requires filters to help the customer 'find good stuff'.

Matching Long Tail Supply and Demand for Physical Goods
I think there is a need to distinguish between Long Tail Demand and Long Tail Supply, especially with physical goods. It's easy to imagine Long Tail Demand for many categories of physical goods, such as Nicholas Carr's example of auto-parts, or foods or eyeglasses or doorknobs. However, just because there is a Long Tail Demand for a certain product category doesn't automatically mean that there is a business opportunity to capture.

It seems that Long Tail Demand must be matched with Long Tail Supply. This would seem to require two things. First it requires that there are suppliers who can produce a dizzying, seemingly-infinite array of product varieties. This certainly seems to be happening today, as Virginia Postrel in "Substance of Style" points out that there are 1500 distinct styles of drawer pulls at The Great Indoors.

The tricky part, I think, will be in MATCHING that Long Tail Demand with the Long Tail Supply. As Chris points out, to get part way down the Long Tail you need a digital catalogue that is searchable, categorized flexibly, etc. That is already fairly commonplace with physical goods, but it isn't enough to accurately match supply with demand. With digital products, consumers can often easily sample/evaluate the product digitally and have a good idea that they are getting what they want. But currently, physical goods often need to be sampled/ evaluated physically. Recommendations and reviews are okay but, you have to actually sit in a chair to decide if it fits your body, you have to test-drive a car to decide you like the way it handles, you have to hold the paint chips up to natural light to see if they match, etc. In business-to-business situations, matching can have more demanding criteria, for example, a manufacturer must sample and prototype new materials before an order is placed, even if the manufacturer found an obscure material from a digital catalogue.

So perhaps in order to capture profits from a Long Tail Demand in physical goods, you first have to also have a Long Tail Supply. (Or you may be able to create Long Tail Demand for an existing Long Tail Supply of products.) Either way, in order to have a viable business opportunity, you may also likely need to innovate around HOW YOU MATCH that supply and demand – beyond just a robust digital catalogue. One example that comes to mind, is the use of digital body scanners to virtually try on clothes (see link) http://www.explore.cornell.edu/scene.cfm?scene=The%203D%20Body%20Scanner&stop=3D%20%2D%20Virtual%20Fit%20Demo

It seems that Long Tail Demand must be matched with Long Tail Supply. This would seem to require two things. First it requires that there are suppliers who can produce a dizzying, seemingly-infinite array of product varieties. This certainly seems to be happening today, as Virginia Postrel in "Substance of Style" points out that there are 1500 distinct styles of drawer pulls at The Great Indoors.

Hi, the long tail theory is really very interesting. However, I am still not sure about the influences of the long tail theory to the goods producer.
As you have mentioned in your book, the cost of producing will decrease considerably, and many amateurs may do their job not for profit. However, the prelimitary is that the producers can sustain themselves. According to the theory, "in abundant market, you can simply throw everything out there and see what happens, letting the market sort it out". That's ture for the itunes or google or netflix website. However, for an individual good producer, its source is always limited. It has to decide it stradge to apply the scarce sources. Athough it would be much easier for people to locate the goods, there is still a great possibility that its income can not sustain the producer.That would be the nightmire for the producers, especially the smaller campanies. So there might be three possibilities, 1. the producer cater its product to more people, make it a hit goods 2. the producer risk its products to cater to few specialized people and fortunately make enough money to sustain and then it will expand its products to serve these specialized people.3. the producer failed to sale its nichie products and get elimilated by the markets. So in my opinion, the long tail theory would make little difference to the producers current judgement. I am just a little lost here. Could you explain it to me?

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